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Let Me Explain

This week I was supposed to write about how to invest in real estate with your retirement account. However, I realized that perhaps I did not explain the process of investing in a syndication as completely as I should have. 

If you missed the steps in investing in a syndication (group investment) last week find it HERE. 

For those of you who are REALLY looking forward to the segment on investing with your retirement account so you can jump ahead HERE. 

Let’s Review the process of investing in syndication. I gave you the general overall steps. But I think I could do a better job in explaining the tactical pieces.  If you are a “left brainer” like me, then last week’s newsletter was not enough to fill in all the gaps. 

Now let us expand on the Syndication Process…

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Step one: Understand Syndication Basics. 

If you need more information on what a Syndication is and how it works. Read my Series on Syndication HERE. 

Step Two: Assess Your Financial Situation. 

This one is one is mostly on you. My best advice is: 

• Never invest more than you can comfortably lose. 

• Look for investments with Asymmetric returns. That is investments that have a higher potential for upside returns than downside risks. 

Step Three: Find Syndication Opportunities. 

If you are new to syndications, you may need some help here. 

• If you would like some recommendations of Syndicators, I personally I know, like and trust, then email me at tracy@stonecrestequity.com and I will send you a list of Sponsors/Syndicators. (And yes, StoneCrest will be on that list!)

Step Four: Due Diligence. 

Investigate the following before deciding on an investment. 

• Sponsor.  Interview the person in charge of the investment. Click HERE for a worksheet with a list of sample questions to ask potential Sponsors. 

• Investment Property. Each syndication should have a Business Plan or Executive Summary.  This document provides and overview of the opportunity and is designed to quickly inform potential investors about the key aspects of the deal.  

• Legal Documents: Here is a list of the most common documents involved in a Syndication Investment. Of course, each Sponsor will have their own version so be sure to review each before committing to the deal.

  • Private Placement Memorandum: (PPM) The PPM provides a comprehensive information about the investment offering including risks, terms and structure of the syndication. It will include the minimum investment, fees, distribution structure, sponsor background and many legal disclosures.

  • Operating Agreement: This document outlines the governance and operational procedures for running the syndication. It includes the roles and responsibilities of the parties, who manages the syndication, who has decision making power, how profits are divided, voting rights etc. 

  • Subscription Agreement: This is a binding document where the investor agrees to the terms of the investment and commits their capital ($) amount. It will include your personal information, investment amount, whether you are an accredited or non-accredited investor. With this document you will also legally affirm that you understand the risks and terms of the agreement and acknowledge that you have reviewed and understand the PPM and operating agreement. 

  • Investor Questionnaire: This document collects information to verify that the investor qualifies for the investment (many syndicators only accept investments from accredited investors)

  • Misc. Docs. You may be required to fill out a W-9 for tax reporting purposes or there may be an introduction letter that tells you how to proceed with signing the documents.

Steps 5-7. 

The remaining tasks: committing to the investment, monitoring the investment and exiting the investment are all going to be specific to the individual investment. Not much help I can provide here, but if you have followed my advice on steps 1-4 the rest should be fairly straightforward and an easy lift. 

I hope this helps further your understanding of how syndication works. As always, we are here to help you achieve more wealth with less work.

Give us a call if you have any additional questions about syndications or any other investment ideas you may have. If you are investing in main street vs. wall street, we are here to support you however we can.

And don’t forget to join our private investment club: StoneCrest Partners Alliance. This is a group of like-minded individuals who want to get control of their investments and we like to provide additional content and private events to help accelerate their success.

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This document is solely for informational purposes and does not constitute an offer to purchase a security. Securities will only be offered pursuant to a private placement memorandum in reliance on certain exemptions from the registration requirements of the Securities Act of 1933 (primarily Rule 506(b) of Regulation D and/or Section 4(a)(2) of the Act) and are not required to comply with specific disclosure requirements that apply to registrations under the Act.

Investing involves many risks, variables, and uncertainties. No representations or warranties are made that any investor will, or is likely to, attain the returns shown above since hypothetical or simulated performance is not an indicator or assurance of future results.